6 Ways to Financing Your Business | SMB Compass
Ezra Cabrera | December 22, 2020
A feasible business plan isn’t everything you’ll need to start your own business or a company of your own. You shouldn’t forget about one of the most vital aspects of starting a business, and that’s the financing part. Even when you have products with great potential and marketing strategies that’d go through the roof, you can’t start doing anything unless you have a source of funding.
Almost all startups begin with nothing. However, you shouldn’t let that keep you from pursuing your goal of having your own company. If you’re looking for ways to finance your business, you’ve come to the right place.
1. Use Gold IRA To Secure A Business Loan
One alternative way to secure a business loan is by using your gold individual retirement account (IRA). A gold IRA is just like a regular IRA, only that in a gold IRA, you invest in physical gold instead of the usual retirement fund that uses cash. It can also be in other forms of precious metals such as silver and platinum.
If you have a gold IRA, you can ask your investment firm how to secure a business loan using your gold account. There are several gold investment firms like Oxford Gold that are extending this kind of service nowadays, and if you do your research right, you can take advantage of its benefits. With a gold IRA acting as your collateral, you no longer have to go from one bank to another just to finance your business.
2. Apply For A Commercial Loan
A commercial loan is a type of loan that’s offered by financial institutions. The loan can be availed by businesses that need financing for long-term assets and operational costs. You can opt to apply for a commercial loan if you want an uncomplicated application process.
The process of securing a commercial loan varies, depending on the lender. But generally, a qualifying process is the first step. It’s sort of like a preapproval stage where the lender will be evaluating your financial background and the revenue of the business. After that, the actual loan process will start and you’ll be asked to submit requirements such as the company’s financial statements.
Securing a commercial loan can be a tedious process. You might need to submit several other documents such as the business plan and what your goals and objectives are. Another drawback of commercial loans is the inflexibility of funds because you have to clearly specify where and how the money will be spent.
3. Use Personal Savings
Using your personal savings is perhaps the simplest and easiest way to finance your business. In an ideal world, you probably have saved enough money to finance your dream business. That is if you already knew that you wanted to start your own company. If you have personal savings that you can use, that’s the safest and easiest way to finance your business.
However, it’s a bit risky to use all of your savings for the business you’re planning to start. Maybe your savings aren’t enough to finance your business, so you’re likely to still need additional funding to make it work. There’s nothing wrong with trying to make a safe decision, but don’t forget to secure a backup plan for when your business doesn’t take off right away.
4. Credit Card For Equipment Financing
Credit cards can also be useful in times of financial need, even when putting up a business. You can use your credit card to pay for equipment that your business needs, as most suppliers usually accept credit cards as a form of payment. It’s also a good way to earn rewards, discounts, and cashbacks.
Aside from using the credit card itself, you can use it to get a cash advance. However, make sure you know what you’re doing because cash advances tend to have higher interest rates. Another downside of credit cards is that they’re linked to your credit score, and failing to make your payments on time will surely affect your credit standing.
5. Apply For Government Assistance Loans
In the United States, small business owners can turn to government assistance loans to finance their businesses. The SBA loan, for example, is offered by a federal government agency called the Small Business Administration (SBA) to provide support to small business owners.
The SBA has various loan programs that you can avail from banks and other lenders that are accredited and guaranteed by the agency. Payment terms are more flexible and interest rates are lower, but you need to prepare yourself because SBA loans are known to be very intensive and tedious when it comes to their loan application process.
6. Find A Business Partner Or Investor
If you’ve tried all the steps above and you still need additional funds for your business, you can consider finding a business partner or an investor. One way that you could try is to ask your family and friends if they’ll be willing to become your business partner. As business partners, though, you’d all be sharing responsibilities, as well as in all losses or gains that the business acquires.
An investor, on the other hand, could be an individual or any entity that would invest their money in your business to earn profit out of it. Investors could either give you a loan or buy shares from your company to become one. One of the best ways to meet potential investors is to attend business events and gatherings. Through this strategy, you can be visible, and you’ll have an opportunity to pitch your business ideas to people or companies that are active in investing capital for aspiring business owners like you.
Starting a business is an exciting endeavor. But then, you also need to be reminded that it involves several aspects that can be tedious and even dreary at some point. Don’t let these challenges weigh you down, especially when it comes to financing your business. There are several ways that can help you secure funding for your journey.
You only need to look over them closely, do your research, and compare their pros and cons so you can come up with the best decision. Don’t single out alternative financing options without really knowing if they can benefit you or not. Make no mistake—business is all about taking risks. But with enough knowledge, you can minimize the risks and position your business for success.